Finance and Funding Strategies for Travel and Tourism: A Report

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector. It examines the crucial role of financial management, emphasizing the importance of cost and volume analysis in decision-making processes. The report delves into various pricing methods employed by companies like Merlin Entertainment Plc, including price skimming, premium pricing, and bundle pricing, and assesses their impact on customer attraction and revenue generation. Furthermore, it identifies key factors that influence profitability, such as seasonal variations, political environments, social factors, and current trends, providing insights into how these elements affect the financial performance of travel and tourism businesses. The analysis incorporates case studies of Merlin Entertainment Plc and Restaurant Plc to illustrate practical applications of financial strategies and accounting information within the industry.

Finance and Funding in Travel
and Tourism

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of cost and volume in financial management of travel and tourism sector...1
1.2 Analysis of various pricing methods in T&T sector........................................................3
1.3 Analysis of factors which affect profit of travel and tourism sector................................4
TASK 2 (Covered in ppt).................................................................................................................6
2.1 Various management accounting information which are helpful in travel and tourism . 6
2.2 Use of management accounting system as decision making tool.....................................6
TASK 3............................................................................................................................................6
3.1 Interpret financial accounts of a company........................................................................6
TASK 4 (Covered in poster)..........................................................................................................10
4.1 Analysis sources and distribution of funding for the development of capital projects. .10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Finance is an essential thing for operating various business activities so that all goals and
targets get ascertain in effective manner. It is a duty of an organisation managers to arrange
adequate fund and finance whenever they are dealing in a new activity. There are various
financial system and practices are determine by highly educated managers which get
implemented in an entity to make their operations more and more successful. Every working
sector require funds to incorporate their project and adequate finance as well from various
sources to manage each and every project plan (Devra Gartenstein, 2017). For this project,
mainly two organisations context have been used which are Merlin Entertainment Plc whom are
operating 115 attractions in more than 23 countries which cover four continents. Another one is
Restaurant Plc which is another group with 470 restaurants and pubs in the world. On the basis
of them several major concepts get analyse which are related with importance of cost, volume
and profit in decision making process of a company. Moreover, use of management accounting
information will enable an firm in taking a beneficial judgement. On the basis of financial
statement which assist in maintain sustainability for project.
TASK 1
1.1 Importance of cost and volume in financial management of travel and tourism sector
Financial management refer to a concept which enable an organisation to use and manage
all flow of fund in an effective and efficient manner so as to accomplish all objectives on time. It
is a highly specialised function which have to get done by use of superior management by using
their knowledge and experience properly. A major target of financial management is to maximise
profitability and minimise all expenses and losses of a firm which directly made a vast impact on
increase in market share. If a company have enough finance then they have to work more on
managing all inflow and outflow of cash to avoid debilitating finance charges and maintain
proper capital as well to met with expenses properly (Evans, Stonehouse, and Campbell, 2012).
Travel and tourism sector is one of the most profit generating sector than any other
consent. Companies whom are dealing in such scenario have to maintain proper flow of cash at
any time so that they are going to met with all requirement of their guest properly and provide
them high range of satisfaction as well. Merlin Entertainment Plc group is one of a group whom
are providing quality based experience to their ultimate users with the help of providing man
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made attractions. Basically company is dealing in three major segments which are: Midway
Attractions, LEGOLAND Parks and Resort Theme Parks.
In every project of Merlin Entertainment Plc huge cost and volume is require which have
to consider under all of their project (Henderson, 2010). Thus, for management of whole finance
properly, it is essential to determine the cost which is related with their projects so that a proper
decision for price can be take. Prices should have to be in such a manner which are directly
associated with project cost and determine break even point also so that management can render
services to only such number of people not exceed them:
Cost: It is an amount which is given up for a particular asset to establish it and make it ready to
use as well. There are various number of cost are determine which are: Direct cost: In LEGOLAND parks, midway attractions and resort theme parks direct
cost are related with all equipments repairing and their regular checking up. This cost get
included in the ticket price of the projects along with all taxes as well. Thus,
management have to use high quality material at the time of forming such adventures so
that it will consider as one time investment cost. Hence, this will enable an organisation
to maintain such price which is not high in nature. Indirect cost: Merlin Entertainment Plc have to minimise their indirect cost of goods and
services so that they become able to attract vast number of guest. Many times, it get
analyse that companies for earning high profit add many unnecessary cost in their
products which is not beneficial for their sustainable purpose. Resort and theme parks
are best example who incur charges of using pool and the material which provided by
them for using pool are consider as indirect cost because they are apart from ticket.
Hence, Merlin Entertainments have to avoid such sort of things (Heung, V. C.,
Kucukusta and Song, 2011). Fixed cost: Merlin Entertainment Plc have to analyse their fixed cost also which do not
get vary according to output. Insurance and maintenance charges are consider as fixed
cost for such resort and theme park which company pay to others. Merlin entertainment
do not include such charges in their ticket which is a major benefit to their target users.
Volume: Its an analysis which is used to identify the amount of production and manufacturing for
particular goods and services. This should have to get analyse in an adequate manner so that
production took place according to demand and requirement. Merlin Entertainment Plc have to
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analyse their break-even analysis of each and every ride which they usually offer to their guest.
This capacity determination is helpful in making their services effective. Usually, LEGOLAND
is a major attraction of a company in which more and more number of people get attracted
towards that. Management have to determine the capacity of their rides and place with particular
people and then provide tickets according to that. This consent is consider under planning and all
their money get invested at adequate place so that sustainability get attain (Nielsen and
Spenceley, 2011).
1.2 Analysis of various pricing methods in T&T sector
Merlin Entertainment Plc have to use effective pricing strategies which are helpful for
them in attracting more and more number of customers. In travel and tourism sector, wide range
of companies are already working and this is a major reason behind increase in competition rate.
Various yep of brands are already providing by Merlin Entertainment Plc in which different
pricing strategies are getting used. Three major segments in which reference organisation is
operating business around 115 attractions with more than 23 countries operation as below: Midway attraction: These are such sort of attractions which are usually located at such
locations from where wide range of people easily seen them. Sea Life is one of a major
midway attraction which is located at beautiful banks of Loch Creran in Oban, Scotland.
This attraction is attractive in nature because mainly such sort of things are located near
to beach where people get attracted towards such location. Price Skimming strategy is
used as a tool through which company attract most number of guest (6 Different Pricing
Strategies: Which Is Right for Your Business?, 2017). At the time of introductory stage,
company maintain their rates high which enable them in gain more and more people
towards such locations (Papatheodorou, Rosselló and Xiao, 2010). LEGOLAND parks: These are such sort of locations which are created for a purpose to
such families who want to spent a whole day together. LEGOLAND theme park of
Malaysia was the first in Asia and Sixth in the world. It provide vast range of facilities to
their guest with a whole day fun, education and adventure to kids. Capacity of hotel is
about 249 guest rooms are themed with two separate sleeping areas. For this context,
Merlin Entertainment Plc is using pricing at premium strategy under which they set their
cost high as compared to their competitors. LEGOLAND theme park is unique in nature
and this is a major outcome behind their success. Organisation create a value perception
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for such services which they render. Merlin Entertainment plc are already providing wide
range of services in which guest children learn so many things as well. Management
created a own world within 76 acres campus (Pike, 2012).
 Resort theme parks: Alton resort theme park is United Kingdom number 1 theme park
with most loved kids attraction. It also includes a luxury spa into it which provide a feel
of relaxation to their guest. Along with this, there are wide variety of rides and live shows
are also operating over there. Thus, for this relation, company is using bundle pricing in
which they provide a proper package for a one day to their guest for each and every ride.
Thus, many customers purchase their services for entire day through which management
become able to ascertain number of customers experience in a single day.
These are the different pricing strategies which use by Merlin Entertainment Plc in their working
through which they become able to beat their competitors in a easy manner. Although, this is
helpful for them in increasing profit margin as well.
1.3 Analysis of factors which affect profit of travel and tourism sector
Profit ascertainment is a major fact which work as a major reason behind operating every
business segment. Many Not For profit organisations are already taking place whose main aim is
to improve standard of society by upbringing them. Thus, many factors are already identify
which affect the profit of travel and tourism business most. Merlin Entertainment Plc have to
determine all such facts and then prepare their strategies in such manner so that dealing with
them become easy. Managers and every individual related with organisation have to take such
concern in account on serious basis. Following are the major factors which are going to affect
profit of Merlin Entertainment in positive and negative aspect. Seasonal variations: Merlin Entertainment Plc have to determine all things which are
related with season. Seasonal variations are major thing which affect profitability of
business. Managers have to analyse all season in which their business is on high peak
load or low peak load. In summer, business tourism sector have high capacity to generate
profit. In Winter, number of tourist at resort and water parks are low due to temperature.
Thus, business do not become able to deal with them and their profit get decline as well
(Pocock and Phua, 2011). Political environment: Change in government also affect profitability of business
because many new tax reforms get added and other factors as well. In USA, government
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banned Muslims to visit over there. This affect profit of tourism sector due to number of
Muslim visitors. Merlin Entertainment Plc have to take in account all political variations
and then take adequate decision (Ritchie, Amaya Molinar and Frechtling, 2010). Social environment: Merlin Entertainment Plc have to identify social environment as
well in which society upbringings is must. Organisation have to provide more and more
job opportunity to such group who do not have adequate and sufficient opportunity of
jobs. Along with this, launch several plan which are beneficial for society which enable
them in create a distinct image of entity. Thus, their profit get maximise by interference
of society. Current trends: Another major aspect which increase and influence profit margin of
business is current trends. Choosing a option of starting a LOGOLAND park in Malaysia
is one of an appropriate decision for a company because it was first LOGO theme park in
Asia. Thus, current trends refer to all such activities which are taking place in present
times.
 Staff: Another major aspect on which every firm have to work and connect with all guest
on regular basis is staff members. Merlin Entertainment have to recruit such number of
staff members whom have capability to deal with every situation and greet with guest
properly. Thus, a good and respected behaviour by staff members will attract and
enhance profit margin of business. On the other hand, if behaviour is not adequate in
nature then it will lead to influence profitability most. Hence, staff can be termed as
major factor which affect profit of business of travel and tourism (Spenceley, 2012).
All these factors play an effective role to influence profitability of business. By preparing proper
strategies and identify major reason will support to deal with them and enhance productivity as
well. Front house staff have a regular contact with guest so that they are consider as most
influencing factor on profit. Along with this, some major impact also get enforced by seasonal
variations. Change in season will directly lead to made a vast impact on business. But if changes
are going to be merge with current trends then it will provide support in dealing with variances
whom impacted on business.
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TASK 2 (Covered in ppt)
2.1 Various management accounting information which are helpful in travel and tourism
2.2 Use of management accounting system as decision making tool
TASK 3
3.1 Interpret financial accounts of a company
Decision making is an essential tool for every business which based on various financial
statement prepared during an entire year (Tribe, 2015). It is essential to interpret the financial
accounts of a company so that each and every target get ascertain in an adequate manner. There
are different number of methods have been which are helpful in interpret the financial accounts
in an adequate manner. Restaurant Plc operates 470 restaurants and pubs in all over the United
Kingdom. Management wants to interpret their data of last few years so that they are going to
take effective decision for another new restaurant in London. Thus, there are various number of
financial accounts are prepared by an organisation in maintain their proper flow of accounts:
 Cash flow: It is very important for an organisation to determine the amount of inflow and
outflow which is taking place for an organisation. Management have to analyse all books
and financial statement which includes detail description about inflow and outflow
management of cash related activities whether they are investing, operating and financing
activities. Positive cash flow is a sign that all operations are conducting in an adequate
manner so that all targets get ascertain in an effective manner. Restaurant group plc have
to analyse their cash flow statement through which analysis for their project become easy
and appropriate.
 Balance sheet: It is very important for every business concern to determine all assets,
liabilities and shareholders equity in a given period of time. Such statement is termed
balance sheet of a company which provides a overview to all investors about current and
specific position about an organisation. This account statement preparation is beneficial
to analyse the books and conclude a beneficial decision for further investment as well
(Vellas, 2011). Restaurant group plc balance sheet have to determine properly so that
adequate information about their perspective in the year 2015 and 2016 get properly
analyse.
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On the basis of these statement, an organisation performance get measure so that appropriate
decision will be carried down. Thus, along with these financial statement, several other formats
are also used to analyse performance of an organisation in relation to take beneficial judgements
for future perspective. Current ratio: This ratio is helpful in analysing the current and present perspective of a
company. All the information about current assets and current liabilities have to take
place properly. This signifies about an organisation capability to deal with present
financial crises of business (Wong, Mistilis and Dwyer, 2011).
 Return on capital employed: Restaurant plc invest more and more amount on money in
their projects. Thus, management have to identify the return on capital employed on their
projects so that adequate return will be gain.
 Debtors collection period: Restaurant plc group have several debtors as well like other
large firms. Thus, management have to prepare such strategies and provide a proper
period to their debtors for payment. If any of their debtor will not made their payment on
time then it will consider as debt for a company. Thus, debtor collection period play an
effective role and provide guide to investors about an organisation actual performance
and relation with their debtors.
Following is a income statement of Restaurant Plc which state about their financial position of an
organisation in relation to make their operations more effective in nature. Thus, chances of
taking appropriate judgements in short period of time become easy for authority. Along with this,
several ratios also get analyse through which investors can take more keen decision on
investment in an entity (Zapata and Hall, 2012). A major goal for preparing these statement is to
provide accurate information about operations to all shareholders.
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Ratios:
Quick ratio:
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